#OpenAfrica: VOD killed the video store

an #OpenAfricaMag feature by Jon Pienaar.Why you should say goodbye to your local video store (if you still have one), and hello to video-on-demand (VOD) — a look at which VOD players have entered the market and what this means for advertisers.

If you have young kids, be sure to take them into a video store and show them around, so that they can tell their kids about that archaic technology, where we actually had to buy or rent physical discs in order to watch a movie. That’s what technology pundit and researcher, Arthur Goldstuck, of World Wide Worx, advises. Because, in the foreseeable future, we are going to be getting more and more of our entertainment from “the cloud” and, in a few years, DVD will go the way of VHS. Eventually, even broadcast will be a thing of the past.

Disrupt

VOD is the technology that has started to disrupt our entertainment world. Instead of watching programming on TV, based upon what some network executive has determined people want to watch (at a time preordained by the network), you can use your fast broadband connection to stream what you want, when you want, to any number of devices — iPads, PCs, Smart TVs — anything with an internet connection. No decoder, no dish.

How does it work? Streaming shouldn’t be an alien concept. Simply put, a digitised video file is hosted on a site that delivers it in (almost) real time to your computer over the internet. Unlike a downloaded file, nothing is stored locally — but you can watch it, pause it, watch it again, as long as you have an internet connection. YouTube is a good example, and already there are full-length movies and documentaries on that platform. But, let’s face it, YouTube is a bit of a jungle. Myriads of video clips are uploaded by individuals, with all sorts of differing qualities. Finding what you are looking for can be a hit-and-miss affair, and content is often removed for copyright violations.

VOD services, though, are curated: much like a TV network, VOD providers purchase content from official channels — TV networks, film distributors, even other VOD services. Subscriptions are offered on a per-household basis, and some allow for multiple streams to multiple devices. The content is made available in the form of a digital ‘library’ that users can watch at their leisure. Some providers offer different levels of access, similar to pay-TV bouquets, and some provide specialist libraries, such as Nollywood, Bollywood or Afrikaans.

How does one connect? You need a fast broadband connection and a ‘smart’ (internet-enabled) TV. You may also watch on any number of connected devices, such as smartphones, tablets and PCs. Alternatively, there are media centres, such as the Apple TV, or you could repurpose a PC to send a signal to an older big-screen TV, or a large PC monitor.

Main driver

The main driver behind the revolution is the recent rollout of fibre-optic cable (known simply as fibre), which provides a faster, better and cheaper broadband experience than the ADSL that most people associate with the term “broadband”. Telkom has announced that some 500 000 homes will have access to fibre by the end of 2016, but Goldstuck points out that this figure could be optimistic. “At the moment, they say they have 38 000 homes with access. What’s not clear is whether that’s access or use. So what I believe it means is their fibre runs past that number of homes, and the reality is they have far fewer actual customers for fibre.”

But Telkom isn’t the only company digging up sidewalks and laying underground cables. Vumatel [which acquired aerial fibre provider, Fibrehoods in October 2016 — ed-at-large], the company that created the first fibre neighbourhood in Parkhurst, Johannesburg, aimed to have provided fibre to 30 000 customers by February 2016; MetroFibre Networx has set the target of 50 000 live connections by the end of 2018; and, although a there is a lot of activity in Johannesburg, there are rollouts also happening in Kimberley, Bloemfontein, Durban, Pretoria, Port Elizabeth, Cape Town and others.

“Each time another suburb signs on, it adds another three to six thousand homes to the list,” says Goldstuck, adding: “So chances are by the end of next year we will have close to half a million homes — that’s not Telkom alone, but in total.”

Netflix — one of the US’s largest VOD providers — shifted its timetable forward to launch earlier in 2016 than originally planned, as local South African media giants had already announced their intentions to enter the field.

Market entrants

One of the early entrants to the market was JSE-listed Times Media Group, with a service called Vidi, which promised to become “the premier media streaming service in South Africa”. This was followed by Altech’s Node, a set-top box that not only provides streaming video, but also hooks up with smart devices to become the ‘brains’ of a connected home (in anticipation of the much-vaunted Internet of Things, or IoT). But perhaps they came to market too soon, as there was very little uptake by the public (although there was not much marketing put behind the services). Node closed business in October 2015 and, in February 2016, shortly after the launch of Netflix, Tiso Blackstar, the investment company behind Times Media, announced the closure of Vidi.

ONTAPtv, backed by Hong Kong-based PCCW Group, and ShowMax, owned by SA media giant Naspers, are the current two major players in the SA market. These offer some niche programming, such as Cantonese, ‘Bollywood’, Zulu, Sepedi, Xhosa and Afrikaans content.

You may notice that there’s no mention of sport. South Africans love their live sport and, for now, that’s one thing that will give broadcast the edge: streaming technology, as it now stands, doesn’t cater for live events. It’s not impossible, however, and it’s just a matter of time before you will be able to ‘tune in’ (or log in) to any number of live events around the world.

As for prepackaged entertainment, South Africans, who once only had DStv and SABC to choose from, are now spoilt for choice — especially those who are ‘broadband-rich’. Netflix offers three plans, ranging in price from $7.99 (R124) to $11.99 (R186), while Showmax charges a flat fee of R99, and ONTAPtv has packages ranging from R39 to R89. ONTAPtv also offers single movies to ‘rent’ for 48 hours at between R15 and R25 [these prices were current at the time of the original publication of Open Africa — ed-at-large].

Advertising

Netflix hopes to encourage signups with a one-month free trial, Showmax offers one week, and ONTAPtv gives one the opportunity to sign up free for a limited selection of programming. Other brands to enter this market include cellular provider, MTN, with a subscription-based or rental VOD model called VU (formerly FrontRow). The data charges are zero-rated for MTN subscribers. DStv has also flirted with the market, offering a live streaming rent-to-view service called BoxOffice.

Netflix has always been free of advertising and, at this stage, most providers are following suit. For marketers, this means that product placement will become more common. The 2015 James Bond movie, Spectre, featured no less than six branded cars, three alcoholic beverages, and a long list of electronic devices and luxury items.

This doesn’t mean the end of advertising, however. In the US, Hulu offers the option of a discounted service with tailored ads. A study by the Advanced Advertising Media Project in the US, where test audiences had ads inserted in much the same way as they are in conventional TV, showed that consumers accept it as a logical part of the viewing experience.

In parallel to the legitimate services, there are also several streaming services that offer ‘pirated’ content for free. These have become popular with the younger crowd — the teens to early 20s — who may be reluctant to sign up with any one provider. As initiatives increase to clamp down on internet piracy, these services may prove to be unreliable, and the relative cost-effectiveness of a Netflix or ShowMax will probably convert most users to legitimate streaming options.

For those who do not have access to broadband, however, the standard broadcast services (state/national TV and subscription-based satellite TV) will have to suffice. Roll on, ubiquitous internet! VOD is just one more reason for everyone to have access to broadband.